Syovata Ndambuki

Every year, the Central Bank of Kenya (CBK) conducts an annual residential mortgage survey as part of the Bank Supervision Annual Report. The annual mortgage survey is critical in monitoring developments and challenges in the mortgage market for residential housing. For the 2024 report, released in Mid July, 2024, a detailed questionnaire was distributed to all commercial banks to collect data for the year ending 2023. Here are the key highlights from this year’s report:

Non-Performing Home Loans

The survey, revealed that in 2023, 89.5 percent mortgages were from 9 institutions. 6 of the institutions are banks from the large peer group (76.4 percent) and two from the medium sized banks (13.1 percent). This differs slightly from 2022 date where 83 percent of mortgages were from 8 institutions – one medium sized bank (8 percent) and seven banks from the large peer group (75 percent).

Kenya Commercial Bank, Kenya (KCB) was the leading mortgage lender in 2023 with 31.3 percent of the total mortgage loans in the market. This translates to 8,724 mortgage accounts. KCB Back has dominated the mortgage market years, as a leading lender to both commercial and household borrowers.

Kshs 40.8 B

In 2023 the value of non-performing mortgages or defaulted home loans was Kshs 40.8 billion. This is according to the Annual Residential Mortgage survey, 2024

Stanbic Bank, Kenya came in second with 12.3 percent of mortgage loans in 2023, followed by Housing Finance (HFC) with 8.5 percent of mortgages in 2023.

2023 saw an increase in non-performing mortgages or defaults from Ksh.37.8 billion in December 2022, to Ksh.40.8 billion in December 2023. Meanwhile, the value of mortgage loans owed by borrowers was Ksh.281.5 billion in December 2023. This is a slight increase fromKsh.261.8 billion worth of mortgages in December 2022. This represents an increase of Ksh.19.7 billion or 7.5 percent.

8% increase in mortgage accounts

As of December 2023, there were 30,015 mortgage accounts in Kenya. This is a minor increase from 27,786 mortgage accounts in December 2022. Though there was a minor increase of 2,229 mortgages or 8.0 percent in 2023, the numbers are still low compared to the 25.5 million people in the Kenyan labour market.

That means only 0.11 percent of the working adults in Kenya had access to mortgages in 2023, despite the introduction of affordable loans by the Kenya Mortgage and Refinancing Commission.

Average mortgage loan size

The average mortgage loan size remained at Ksh.9.4 million in both 2022 and 2023. Meanwhile, the average interest rate charged on mortgages in 2023, was 14.3 percent. The interest rates ranged from 8.7 percent to 18.6 percent.

This marked a increase in average rates compared to the year 2022 which had an average interest rate of 12.3 percent ranging between 8.2 percent and 17.0 percent. About 88.4 percent of mortgage loans were on variable interest rates in 2023, as compared to 88.3 percent in 2022.

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A variable interest, also known as a floating rate means the rate moves up and down according to changes in the economy or the mortgage market. This type of interest rate differs from a fixed rate which stays the same during the loan period.

Majority of banks offered mortgages covering 90% of property value and below ad the maximum loan amount . And the average loan maturity was 11.7 years. The minimum number years for loan maturity was 5 years while the maximum was 18 years in 2023.

Low income, property prices impede access to mortgage

The survey also sought to uncover the obstacles affecting Kenya’s mortgage market and commercial banks outlined a total of 11 factors. Low income levels was the biggest impediment to mortgage access among many aspiring borrowers. The high cost of property prices followed closely as the second biggest issue.

The lands sector also presents several obstacles for the mortgage market in Kenya. Commercial banks mentioned several issues touching on land . These include, high cost of land, titling issues and stringent land laws.

Common issues affecting access to mortgage in Kenya

According to the 2023 Annual Residential Mortgage Survey, these 11 issues are the leading obstacales to the growth of Kenya’s mortgage market.

• Low level of income
• High cost of property purchase
• Limited access to affordable long-term finance
• Difficulties with property registration/titling
• High cost of land for construction
• High Incidental costs (legal fee, valuation fee, stamp duty)
• Credit risk
• Lengthy charge process timelines
• Stringent land laws
• Limited consumer knowledge on mortgage products
• Lengthy process of security realization by banks in case of default

Affordable Housing

When asked to make suggestions on how the mortgage market can be improved, moving forward, the responses touched on multiple sectors. From legal to lands and infrastructure. Affordable housing was however a key theme as property prices discourage or prevent borrowers from accessing mortgage.
Some of the suggested measures include:

• Finalizing the digitalization of lands records through Ardhisasa to support the mortgage documentation process.
• Increase availability of low-cost housing options.
• Provision of basic infrastructure services to developers by national and county governments.
• Streamlining and simplifying the legal and regulatory process governing the mortgage sector, for transparency, efficiency and certainty
• Increase the focus on implementation of affordable housing programs by the government.
• Availability of affordable long-term funds through initiatives such as the Kenya Mortgage Refinance
  Company (KMRC).